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Posts Tagged ‘Cyprus’

Leaks in the Dam?

March 28, 2013 1 comment

Interesting things happened this morning. I assisted to one of the presentations of the OECD interim assessment. There is nothing very new in the assessment, that concerning the eurozone, can be summarized as follows

  • The outlook remains negative (while the rest of the OECD countries are doing better)
  • There is still room for monetary accommodation
  • This monetary accommodation may not benefit the countries that need it more, because the transmission mechanism of monetary policy is still not fully working
  • The Cyprus incident shows that there is a desperate (this I added) need of a fully fledged banking union
  • EMU countries need to continue on the path of fiscal stabilization, even if automatic stabilizers should be allowed to fully play their role, even at the price of missing nominal targets Read more

Cyprus. Been There, Seen That

March 19, 2013 2 comments

A small country is on the verge of bankruptcy. It is so small that the amount of money needed to save it (17bn euros) amounts to less than 0.12 per cent of the eurozone GDP (no typos here. It is around 30 euros per European citizen).
Been there, seen that. Just three years ago in another small country, Greece. At the time, procrastination, self interest, ineptitude, unpreparedness, made the small problem become huge. And we are all still paying the bill. The Greek crisis management was so successful that our leaders are happily embarking in the same dynamics: improvised, dangerous, half-baked solutions, supposedly designed to avoid free riding (the protestant syndrome, once again) and in fact destabilizing the whole system.

There is no need for me to repeat what has been understood everywhere except, as usual, in Berlin, Frankfurt and Brussels: the tax on deposits breaks an implicit pact between governments and depositors, and fragilizes the banking systems of the whole periphery of the eurozone. Read More